On regional borrowing, default, and migration

Grey Gordon and Pablo Guerron-Quintana

Journal of International Economics, 2024, vol. 150, issue C

Abstract: How do local government borrowing, default, and migration interact? We find in-migration results in excessive debt accumulation due to a key externality: Immigrants help repay previously-issued debt. In addition to providing direct IV evidence on this mechanism, we show cities are heavily indebted, near state-imposed borrowing limits, vulnerable to interest rate increases, and default even after periods of robust population and productivity growth. Our quantitative model reproduces these features of the data and reveals a bifurcation: in-migration strongly affects borrowing, but borrowing only weakly affects migration. The model predicts large interest rate declines in the Great Recession prevented a wave of municipal defaults.

Keywords: Migration; Debt; Default; Bankruptcy; Cities; Regional (search for similar items in EconPapers)
JEL-codes: E21 F22 F34 R23 R51 (search for similar items in EconPapers)
Date: 2024
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Working Paper: On Regional Borrowing, Default, and Migration (2019)
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Persistent link: https://EconPapers.repec.org/RePEc:eee:inecon:v:150:y:2024:i:c:s0022199624000400

DOI: 10.1016/j.jinteco.2024.103916

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